While the court sentenced Lakshminarayanan and Srinivasan, executive director and senior vice-president respectively of FFSL at that time, to imprisonment up to three years, the officials of ABFSL were sentenced to four years.

According to the judgement passed on Thursday, those convicted "knowingly conducted fraudulent transactions between FFSL and ABFSL between July 1991 and May 1992".

As per the prosecution's case, FFSL, a private firm, was facing an acute cash crunch and was desperately in need of additional funds.

It, thus, began to borrow heavily from ABFSL and other banks and financial firms. Those convicted facilitated such borrowings without ensuring that the transactions were made against credible securities and stocks of the FFSL. ABFSL officials convicted in the case issued illegal security receipts to the FFSL for these transactions, and it in turn made wrong declarations to other lenders by giving these security receipts that had been issued against securities and stocks that the FFSL did not really possess.

The court, however, acquitted Gopal Shankar Iyer and P Chandrashekhar, two other officials of FFSL, and share broker Pallav Seth.

The court also rejected the plea for leniency pressed by the convicts on account of the long trial, their old age, and on the argument that they did not make any personal gains out of these transactions.

"This special case is a fallout of the financial scam that rocked the economy of the nation in the era of Harshad S Mehta," Justice Phansalkar-Joshi said. "It is true that in this case the offence has taken place in 1992 and that in these 24 long years the accused have undergone the rigours of the trial, which were in the nature of physical and mental torture also, as the sword of this case was always hanging on their heads," she said.

"However, considering the serious nature of the offence and the repercussions it had on the nation's economy, taking a lenient view can have a counter-effect. An appropriate message needs to be sent out to the society," she said.

"In my considered opinion, the evidence of all these prosecution witnesses, some from FFSL, some from ABFSL and some from an independent source, like RBI, is more than sufficient to prove beyond reasonable doubt that ABFSL has deployed crores of funds to FFSL on 'securities receipts', which were, to their own knowledge, not backed by physical securities and it was done by the ostensible transactions of sale and purchase.

"Their evidence also proves that the money received by FFSL from ABFSL in these transactions was diverted by FFSL to share market investment and not for purchase of securities," she said.

Justice Phansalkarb Joshi added that even if the court were to accept the contention that the convicts did not make any personal gains, it must remember the view taken by the apex court in previous judgements that financial scams affect the economy of the nation.

"Such scams result in the loss of hard-earned money for many innocent members of the public. Some victims even lose their lives," she said while awarding the sentence. The court, however, suspended the sentence of all the convicts for four months to permit them to file their respective appeals in the Supreme Court.